Mr. Bernanke and his Federal Open Market Committee surprised markets this week by declining to begin tapering their monthly purchases of $45 billion in US Treasuries and $40 billion in mortgage bonds. St. Louis Fed President James Bullard said markets shouldn’t have been surprised by the decision because the FOMC members have repeatedly said the decision to slow, or taper, would be “data dependent.” A nearly 1.5% jump in stocks on top of the no-go Syria rally of nearly 5% definitely implies surprise.

September’s gain of 8.92% (total return) for the S&P 500 index represented the largest increase for the month since 1936. The most widely used gauge of value, the price/earnings ratio shows stocks are still reasonably valued at 12.5 times projected earnings for the next 12 months. Projections are for earnings to grow 36% this year and 15% next. In the past two weeks individuals’ confidence in stocks has risen the most since March 2009, according to the American Association of Individual Investors. The March 2009 rise in sentiment preceded an 82% rise in stock values which peaked most recently in April of this year.

The election is over, oil and gasoline prices are coming down, the stock market is going up, and the job market is improving.  These trends suggest continued improvement in the consumer side of our economy and this week’s economic numbers certainly bear that out.  The loudest and best indicator, the stock market, rose 1% this week and is up over 7% since the end of October.  All these factors suggest a better holiday season for retailers, particularly online retailers whose sales are up over 12% compared to this time last year.